Assignment 2: DCF Analysis - Mid-Michigan Manufacuring Inc. (MMMI)Mid-Michigan Manufacturing Inc. (MMMI) wishes to determine whether it would beadvisable to replace an existing production machine with a new one.The have hired yourfirm as a consultant to determine whether the new machine should be purchased. The datayou will need to make this determination is as follows:MMMI has decided to set a project timeline of 4 years.The new machine will cost $1,100,000. It will be depreciated (straight line) over afive-yearperiod (its estimated useful life), assuming a book value of $100,000 at theend of its estimated useful life, i.e. at the end of Year 5.The old machine, which has been fully depreciated, could be sold today for $253,165.The company has received a firm offer for the machine from Williamston Widgets,and will sell it only if they purchase the new machine.Additional Sales generated by the superior products made by the new machinewould be $665,000 in Year 1. In Years 2 & 3 sales are projected to grow by 8.5% peryear. ear. However, in Year 4, sales are expected to decline by 5% as the market starts tobecome saturated.Total expenses have been estimated at 60.75% of Sales.The firm is in the 21% marginal tax bracket and requires a minimum return on thereplacement decision of 9%.A representative from Stockbridge Sprockets has told MMMI that they will buy themachine from them at the end of the project (the end of Year 4) for $100,000.MMMI has decided to include this in the terminal value of the project.The project will require $100,000 in Net Working Capital, 54% of which will berecovered at the end of the project.Part A: Base Case project decisionOn the Assignment spreadsheet, on the part A tab, fill in the value drivers.Build the DCF Model, and calculate NPV and IRRSomewhere on this tab, state whether or not the company should purchase the newmachine just based on the Base CaseNote: your company has estimated that the Base Case has a 50% chance of being correct.Part B: Best Case evaluationAssume Sales Growth in Years 2 & 3 are 9% instead of 8.5% (Year 4's projections remain asales decline of 5%). Also assume costs are 60.5% of sales instead of 60.75%.Note: Your company has determined that this scenario has a 5% chance of occurring.Part C: Worst Case evaluationAssume Sales Growth in Years 2 & 3 are 7% instead of 8.5% (Year 4's projections remain asales decline of 5%). Also assume costs are 61.0% of sales instead of 60.75%.Note: Your company has determined that this scenario has a 15% chance of occurring.Part D:Alternative Case evaluationAssume Sales Growth in Years 2 & 3 are 8% instead of 8.5% (Year 4's projections remain asales decline of 5%). Also assume costs are 60.9% of sales instead of 60.75%.Note: Your company has determined that this scenario has a 30% chance of occurring.

Conclusion:Looking at all 4 of the scenarios above, write a minimum of 3-4 sentences about whether ornot you would recommend that the company purchase the new machine, and why.To get all of the points for this section, you will need to write something meaningful. Simplysummarizing the data for each of the scenarios will earn ZERO points for this section. Iexpect you to clearly state your recommendation for whether the machine should bepurchased (as in "Buy" or "Don't Buy"). Saying something like "I would purchase themachine under the base scenario, but not if Part B if occurs" is NOT making arecommendation! We don't know which scenario will occur; we only have probabilitiesassigned to each. Make a decision, and defend your choice. A well thought out answer willearn full points, even if your decision is not the same as the one I would make.